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  1. Wealth
February 15, 2012

FT: Higher-rate tax relief on pensions to be reduced?

By Spear's

Ministers are drawing up plans to raid the pension contributions of higher earners to help pay towards lifting everyone earning under £10,000 out of tax

Ministers are drawing up plans to raid the pension contributions of higher earners to help pay towards lifting everyone earning under £10,000 out of tax.

Workers currently receive tax relief on the money they pay into their pensions, up to a maximum of £50,000. But under controversial plans being discussed by the “quad” at the heart of the coalition – David Cameron, the prime minister, Nick Clegg, his deputy, George Osborne, the chancellor, and Danny Alexander, the Treasury chief secretary – this upper limit would be reduced, with potential savings of billions of pounds.

For higher earners, the move will feel like a tax rise: those paying the top rate of 50 per cent can claim relief of up to 50 per cent on their pension contributions, meaning that for every £1 they put into their pension pots, the government tops it up with an extra 50p.

One person close to Mr Osborne said: “This is being looked at, it is definitely a good way to be able to raise money to get towards the £10,000 tax rate.”

To read the full story, visit ft.com

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